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Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

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Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#361

Post by tomkarlo »

googlryas wrote: post #300
hacknat wrote: post #240

Earlier quoted context omitted.

Shkreli had an ongoing fraud and sec violations before Turing Pharma. Though it looks suspicious, his prosecution is coincidental with the Turing stuff and revolves around the truly atrocious management of his hedge fund. Shkreli deserves what he got, but not because of his public bravado or raising the price of a drug, but because he actively embezzled money and created a Ponzi scheme.

Was it a Ponzi scheme? I've read that he basically lost his investors money in a real investment failure, and then 'donated' some of his shares from his other, unrelated company to make the investors a profit and look good.

Loosely speaking, it was - he was using the supposed gains of earlier investors to attract new investment, then using those new funds to pay off the earlier investors. It was spread across multiple investments rather than just one vehicle, but that seems kind of irrelevant.

"Prosecutors were focused on Shkreli’s leadership of two hedge funds, MSMB Capital and MSMB Healthcare, and a pharmaceutical company, Retrophin. Shkreli raised millions for MSMB Capital, but not as much as he told investors. When he made a bad bet that doomed the hedge fund, he launched a scheme to cover it up, prosecutors said. He raised more money for another hedge fund, MSMB Heathcare, which he largely used to fund the start up of Retrophin.

When disgruntled investors attempted to claim their profits, Shkreli used money from other investors and Retrophin cash and stock to pay them off, according to prosecutors." https://www.washingtonpost.com/news/business/wp/2017/08/04/m...

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#362

Post by jonny_eh »

sulam wrote: post #241
fwdpropaganda wrote: post #137

Earlier quoted context omitted.

That's extremely interesting, thanks for sharing. Think about the decision that he had to make in 2016. He had to choose between admiting his mistake and doubling down. The downside of admitting his mistake is that he's guaranteed to get negative points; the upside is that it will minimise futures downsides. By dubling down, he's guaranteed to reduce his negative points in 2016 but exposes himself to magnified upside…

I think you're ignoring the iterated nature of the game he plays. He is looking for founders to fund -- deal flow is the lifeblood of any VC. This is a signal like many other, and what it says is "As an early stage investor I absolutely have your back."

Seems fine for entrepreneurs running scams. Honest founders would rather work with honest VCs.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#363

Post by shaki-dora »

Ice_cream_suit wrote: post #344

From the Financial Times: Here's the nuance of her formula: Commit fraud as an attractive, well-connected WASP woman who happened to be neighbors with well-connected VC Draper family. Tell a great story: Stanford drop-out who studied Chinese, afraid of needles, wants to help the world. Leverage Silicon Valley connections to pull in other really big fish, such as Kissinger, et al, who would be really, really embarrass…

Be a man: “what a scammer”

Be a woman: “this woman used her gender to scam”

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#364

Post by gaius »

BinaryIdiot wrote: post #311
hluska wrote: post #70

Earlier quoted context omitted.

I don't know if I agree with you. Personally, I can't imagine the humiliation of carrying this around with me...

Everyone loves a comeback story, though. In a few years she'll take the circuit of podcasts / news outlets. "I thought we could do it. It started with a single, tiny lie and then it snowballed. I get out of control. I took some time off and now I'm starting my own company. We will be the most transparent company in the world and we're innovating X!" Something along those lines. It's not a life or career ender IMO.

Even Tonya Harding is the subject of a flattering movie now

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#366

Post by justaguyhere »

Nokinside wrote: post #126
_m8fo wrote: post #43

What exactly needs to happen for white collar criminals to be punished commensurate with their crime and consistent with the magnitude of "regular" criminals' punishment? Holmes' punishment is effectively nil. Meanwhile: [1] A man sells $40 with of cocaine and eventually 5.9g of weed lands him 20 years in prison. [2] "Illegal" voting lands a woman 8 years and deportation. [3] Possession of a few shotgun shells gets a…

> There's a word for this. Unacceptable. Expressing emotion and anger can be healthy. But let's discuss this and find out why this is and can and what should be done? * US justice system is designed for settlement. In US 97% of civil cases are settled or dismissed without a trial. 90% of federal criminal cases resolve without trial. 94% of state cases end via plea bargain. * Normal criminals accept harder sentences w…

94% of state cases end via plea bargain.

That is scary

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#367

Post by sgt101 »

wpietri wrote: post #218
mbell wrote: post #209

Earlier quoted context omitted.

"fake it until you make it" generally refers to the product implementation vs pitch on the consumer side. e.g. You pitch "The best automated way to do X!", but in actuality you have a horde of people doing the work initially to figure out the problem before building the actual automation. There is nothing wrong with this and remains a completely viable approach. What you don't do is tell your investors you've already…

I think the Concierge and Wizard of Oz approaches [1] are just one thing people mean by "fake it 'til you make it", but I definitely don't think they're the most common meaning. Startups engage in all sorts of puffery, trying to project the appearance of success long before they have actual success. Fancy websites, fancy offices, sales and investment pitches that cherry pick stories, numbers, and milestones that give…

This is fine when the elements of automation aren't beyond the state of the art. However when you have startups like Spinvox et-al hoping that automated transcription will show up and save them (I mean transcription of variety of voice in variety of environments, using uncharacterized microphones and transcoded from mobile to core ect) or the current rash of chatbot liars and charlatans then real real damage gets done to real companies where execs believe the trendy w*nkers vs real people who understand technology. I've seen good engineers hounded out and scores of millions of pounds wasted because of "warp drive over powerpoint" and I've had enough. Not that I'm bitter or anything.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#368

Post by chmaynard »

Nokinside wrote: post #126
_m8fo wrote: post #43

What exactly needs to happen for white collar criminals to be punished commensurate with their crime and consistent with the magnitude of "regular" criminals' punishment? Holmes' punishment is effectively nil. Meanwhile: [1] A man sells $40 with of cocaine and eventually 5.9g of weed lands him 20 years in prison. [2] "Illegal" voting lands a woman 8 years and deportation. [3] Possession of a few shotgun shells gets a…

> There's a word for this. Unacceptable. Expressing emotion and anger can be healthy. But let's discuss this and find out why this is and can and what should be done? * US justice system is designed for settlement. In US 97% of civil cases are settled or dismissed without a trial. 90% of federal criminal cases resolve without trial. 94% of state cases end via plea bargain. * Normal criminals accept harder sentences w…

> Criminals can be put into prison only if they can be convicted.

Huh? A large percentage of those jailed in the USA have not been convicted of the crime for which they are charged. They are detained until trial because they cannot afford bail.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#369

Post by arbuge »

ChuckMcM wrote: post #23

Ok, this is the money line in that press release for me: “The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.” For all those entrepreneurs are trying to "fake it until you make it" be aware that the SEC considers your…

It really depends on whether the intent to defraud was there or not. The SEC is probably not out to outlaw founders being true believers in their vision, even if their beliefs are often misguided. On the other hand, if there is solid proof that founders knew their vision had no hope of succeeding but presented it as though it did, that could and should be a problem.

Re: Theranos, CEO Holmes, and Former President Balwani Charged with Fraud

#370

Post by joering2 »

ericd wrote: post #326
Noughmad wrote: post #286

Earlier quoted context omitted.

SV/tech/USA is so great, anyone can make it big. You just have to be smart and work hard. Oh, and be family friends with billionaires. Yeah, that's all.

That's one way to get funding, but it's certainly not the only way, there are lots of counterexamples. As one obvious counterexample, one of the founding principles of YC is providing an open application process to provide people who don't have any personal connections access to the SV network. Larry and Sergey weren't well connected when they started, either, afaik, as most PhD students aren't. If you're doing somet…

> Larry and Sergey weren't well connected when they started, either, afaik, as most PhD students aren't.

Doubt it. I don't think In-Q-Tel/CIA will write you a check because you just happen to have this shiny new search engine that may or may not change the world.

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